Sirius Xm Case Study
Sirius Xm (SIRI) Turnaround post 2007 merger
Industry:
* Prior to change: Sector: Consumer Services / Industry: Broadcasting - Radio * After change: Sector: Consumer Services / Industry: Broadcasting - Radio
Challenge Years: Pre and Post 2007 (merger)
•Introduction:
* Sirius and XM, separate companies, began to compete in the satellite radio business in 2001 and 2002. Target market was car drivers and daily commuters who listened to their local radio stations that they preferred, but were limited to small service areas and less range and would lose frequency once out of that locality. Wall Street believed that satellite radio was the next opportunity in consumer electronics.
* The business was very modest at first with a small subscriber base by the end of the first year, XM, for example only had about 27,000 subscribers. But with the backing of Wall Street and the belief that satellite radio companies could find a ready market through partnership’s within the automotive industry which had over 100 million cars and light vehicles traveling the roads of America and roughly 15 million new cars sold each year, the market bore out the theory.
* By the end of 2005, XM had six million subscribers, a little more than its rival, Sirius. But, as investors considered the satellite radio industry to be so promising with immense potential to become a mammoth opportunity, they allowed the two companies to borrow billions of dollars to build out infrastructure, make receivers, manage satellites, and hire talent.
* As aggressive expansion led to immense operating costs without a real strategic alliance in place with any of the major car companies. The losses quickly added up to the hundreds of millions of dollars a year for the rival companies. Merger and expansion: Merger deal was ultimately why we still have the option of satellite radio today with Sirius and XM combining to form a giant and create a strategic vision on how to move forward and
Industry:
* Prior to change: Sector: Consumer Services / Industry: Broadcasting - Radio * After change: Sector: Consumer Services / Industry: Broadcasting - Radio
Challenge Years: Pre and Post 2007 (merger)
•Introduction:
* Sirius and XM, separate companies, began to compete in the satellite radio business in 2001 and 2002. Target market was car drivers and daily commuters who listened to their local radio stations that they preferred, but were limited to small service areas and less range and would lose frequency once out of that locality. Wall Street believed that satellite radio was the next opportunity in consumer electronics.
* The business was very modest at first with a small subscriber base by the end of the first year, XM, for example only had about 27,000 subscribers. But with the backing of Wall Street and the belief that satellite radio companies could find a ready market through partnership’s within the automotive industry which had over 100 million cars and light vehicles traveling the roads of America and roughly 15 million new cars sold each year, the market bore out the theory.
* By the end of 2005, XM had six million subscribers, a little more than its rival, Sirius. But, as investors considered the satellite radio industry to be so promising with immense potential to become a mammoth opportunity, they allowed the two companies to borrow billions of dollars to build out infrastructure, make receivers, manage satellites, and hire talent.
* As aggressive expansion led to immense operating costs without a real strategic alliance in place with any of the major car companies. The losses quickly added up to the hundreds of millions of dollars a year for the rival companies. Merger and expansion: Merger deal was ultimately why we still have the option of satellite radio today with Sirius and XM combining to form a giant and create a strategic vision on how to move forward and